Mid Flight Turbulence
In the third week of July, IndiGo reported its highest ever quarterly profit of Rs 1,203 crore, a staggering 4,230 per cent jump over the first quarter of last year. The strong performance came in the backdrop of the slowdown in the aviation sector as passenger growth plummeted to a multi year low in the first six months of 2019. The airline also reported its highest ever market share of 49 per cent in quarter ended June. All this called for a grand celebration at the Gurgaon headquartered carrier that has grown from a single aircraft to over 238 in just over a dozen years. But the euphoria was clouded by the bitter fight between the friends turned foes co founders Rakesh Gangwal and Rahul Bhatia mainly over the latter's unequal rights and powers and the controversial related party transactions between Bhatia's private firm InterGlobe Enterprises (IGE Group) and IndiGo.
The first salvo was fired by Gangwal who, in a letter to market regulator Sebi's top brass in early July, objected to the "unusual" rights given to the Bhatia controlled IGE Group and his alleged abuse of these rights to serve his vested interests. The IGE Group responded by saying "the parties went into the venture with their eyes open? the deal was struck between seasoned business people who made their own assessment of risks, their rights, and their obligations." Experts say the rights are, indeed, one sided, considering that both the founders hold an almost equal stake. "It's difficult to say why they signed such a one sided agreement. I think nobody had imagined that IndiGo would become so big in a short time," says Amit Sinha, Partner at Bain & Co. The terms survived even during the IndiGo's initial public offering in 2015, when the shareholders' agreement (SHA) was heavily renegotiated twice.
However, after weeks of uncertainty that hit the IndiGo stock and threatened the future of India's longest running profitable airline, reports suggest that the co founders have agreed to a settlement, brokered by the airline's Chairman, M. Damodaran. As per the reports, the co founders have agreed to increase the board strength to 10 adding four independent directors, including a woman (as mandated by Sebi rules). Also, external
